FY2017 BUDGET PRESENTATION

• CEO/PRESIDENT: Steven R. Gordon

• CHIEF FINANCIAL OFFICER: Michael Rogers

• CHIEF MEDICAL OFFICER: Kathleen McGraw, M.D.

• VP-PHYSICIAN SERVICES: Bonnie McKellar

AUGUST 24, 2016

BRATTLEBORO MEMORIAL HOSPITAL

FY 2015-RETROSPECTIVE ISSUES

• 97% or $4.3M of FY 2015 Net Revenue variance were due to two major

factors:

$1,529,214- In April 2015 Congress extended Medicare Dependent Hospital and Low Volume

Adjustment that provided this additional reimbursement that was not anticipated in the

FY2015 budget. We communicated this to the GMCB on 4/24/2015.

$2,790,000- In November 2015 BMH received notice that we had won an appeal of our

FY2009 reimbursement based on a Volume Decline Adjustment (VDA). This VDA is a non-

recurring reimbursement that applied to FY2009. Our auditors required us to post this

settlement to our Fiscal Year 2015 financial statement. We have already been notified that the

settlement is being reopened by Medicare. Our current estimate indicates that we may lose as

much as $1.2 Million of the settlement. We notified GMCB of this settlement when BMH

received this reimbursement.

• For FY 2016 Budget, BMH reduced rates by 1.4% and has budgeted full

year of MDH/LV reimbursement

FY 2016 MAJOR ISSUES/INITIATIVES

• Brattleboro Area Primary Care Challenges

• Strategic Partnership with DHMC and DH-Cheshire

• EMR/Cerner Implementation

• Progressive Care Unit

• Population Health/Reform Investments

PRIMARY CARE CHALLENGES

• Brattleboro continues to experience a significant Primary Care

Shortage and Access Challenge:

BMHPG lost 3.0 FTE Providers

Medical Assistant Turnover at 45%

Restricted Access for New Patients

AHEC research shows Windham County Shortage of over 8.0 PCPs

• BMH Response:

BMHPG recruited 2.0FTE Providers ( PCP and APRN)

Collaborated with CCV to create accelerated MA program and provided 8 full

scholarships

BMHPG expanded Centralized Scheduling Department to ease access for

prospective patients.

Training/hiring Scribes to assist Providers

STRATEGIC PARTNERSHIP

• The strategic regional partnership between BMH, DH-Cheshire and DHMC

builds upon our existing collaborations, allowing us to share and maintain

high levels of specialty medical services throughout the region, improving

local access to specialty care and seamlessly refer patients between services,

while reinforcing the affordability of health care.

• The partnership formally establishes a joint management committee made

up of senior management and Board members from each health care provider.

• The committee will develop and oversee a portfolio of collaboration initiatives

and make recommendations regarding the operationalizing of the

collaboration to the partners’ respective Board of Directors or Board of

Trustees.

• This model reflects no changes in the leadership, management, or ownership

of any of the partner entities.

STRATEGIC PARTNERSHIP

• Ongoing Collaborations:

Emergency Department Provider Staffing

Wound Care

Oncology

Radiology

ENT

Podiatry

• New Initiatives:

TeleHealth for Stroke/Neurology

Pathology

Pain Management

Infusion

Transgender care

EHR/CERNER IMPLEMENTATION

• Software testing to begin Fall 2016

• Working with VITL to update interface feeds to VT Health

Information Exchange (VHIE)

• Implementation Plan on track

• Big Bang in April 2017

PROGRESSIVE CARE UNIT

• Merging 20 bed Medical-Surgical Unit with 5 bed Intensive Care

Unit

Creating an acuity adjustable unit with 3 ICU beds, high acuity and lower

acuity areas, 18 private rooms with surge capacity

Consolidation of nursing staff

Improved safety for patients with nursing substation and decreased handoff of

patients moving from unit to unit

Improved efficiency: one team of nursing, shared supplies, patients stay in one

area over course of care and centralized utility areas

Maintains integrity of current inpatient volume and services

POP HEALTH/REFORM INVESTMENTS

• Funded in FY2017 Budget:

ED Case Management ($175000)

Vulnerable Population Care Coordinator-Groundworks Homeless

Shelter ($35000)

Transportation Support for Rt 30 Corridor ($13000)

Scribes ($120000)

Embedded Mental Health counselors (HCRS sponsored)

Formation of Regional Psych Strategy Group (BMH sponsored)

SBIRT

• Not Budgeted but Committed:

Housing Trust Care Coordinator

EPODE/RiseVT Project Coordinator

See CHNA Workplan (previously submitted)

FY 2017 BUDGET- SIGNIFICANT ITEMS

• Net Revenue Increases 3.4% from FY2016 Budget

• Rate request is a 3.5% aggregate rate increase

• Patient access continues to be a concern

• Implement Retail 340B Pharmacy Program provides $600

thousand net income.

• Developing an Acuity Adaptable Unit

• Budgeted Medicare Dependent Hospital (MDH) and Low

Volume Adjustment (LVA)

OPERATING MARGIN

• Our operating margin is budgeted to remain at a very low

level (0.2%) in recognition of the need to hold down health

care costs to our community.

• Over a longer time frame, our objective is to maintain an

average operating margin of at least 3%. With this budget

we will drop to a 1.6% 5 year margin.

FY 2017 FY 2016 FY 2015 FY 2014 FY 2013 5 year

Bu d g e t Pro je c te d Ac tu a l Ac tu a l Ac tu a lCu m u la tiv e to ta lNet Revenue 80,281,708 75,615,756 78,669,021 75,309,785 69,463,138 379,339,408

Operating gain 157,952 (1,266,933) 2,196,008 2,697,579 2,348,409 6,133,015

Operating margin 0.2% -1.7% 2.8% 3.6% 3.4% 1.6%

CAPITAL BUDGET-MODERNIZATION PROJECT

• Key Component of Master Plan created in 2009

• Replacement of 3 ORs which are significantly undersized

• Renovation of Perioperative areas and relocation of Central

Sterile Processing and Endoscopy/Minor Procedures Unit

• Medical Office space to consolidate several practices

• Power Plant upgrade

• Cardiac Rehabilitation and Pharmacy Relocations

• Expect to file CON in Fall 2016

RESPONSE TO GMCB - MEDICARE

• Medicare net revenues increases 4.2% from FY2016 budget.

• We have included MDH & LVA reimbursement for all of FY2017. We expect

to receive approximately $3.5 Million in reimbursement from these

reimbursement programs which are currently schedule to expire at the end

of FY2017.

Medicare Budget 2017

% of

gross Budget 2016

% of

gross

change from Fy16

budget

Revenue 66,907,656 100.0% 67,733,967 100.0% (826,311) -1.2%

deduction (40,240,006) -60.1% (42,137,353) -62.2% 1,897,347 -4.5%---------------------------------------------------------------- ----------------------------

net 26,667,650 39.9% 25,596,614 37.8% 1,071,036 4.2%

RESPONSE TO GMCB - MEDICAID

Medicaid Budget 2017

% of

gross Budget 2016

% of

gross

change from Fy16

budget

Revenue 33,034,042 100.0% 29,405,467 100.0% 3,628,575 12.3%

deduction (21,700,040) -65.7% (20,513,006) -69.8% (1,187,034) 5.8%---------------------------------------------------------------- ----------------------------

net 11,334,002 34.3% 8,892,461 30.2% 2,441,541 27.5%

• Medicaid net revenues increases 27.5% from FY2016 budget. Medicaid

utilization is 9.3% higher in FY2016 than was budgeted based on gross

revenues before rate increase. This growth appears to come as Commercial

Revenues decline. Payor Mix is shifting Commercial to Medicaid in almost all

departments.

• We have an issue where some Medicaid denials were mapped to Free care in

FY16.

• The hospital expects to lose $389,000 on an annualized basis due to the

termination of Medicaid provider based billing, based on the impact model

developed by DVHA for SFY2017.

RESPONSE TO GMCB - COMMERCIAL

• All other net revenues decrease 2.6% from FY2016 budget. We are seeing

shift from Commercial to Medicaid volume. Our Commercial contracts are

percentage discounts and are generally not renegotiated from year to year.

• Commercial & other reimbursement declines slightly due to lower volume,

changing mix of carriers (more Champus and self insurance) and increasing

denials.

Commercial & Others Budget 2017

% of

gross Budget 2016

% of

gross

change from Fy16

budget

Revenue 57,531,857 100.0% 57,278,434 100.0% 253,423 0.4%

deduction (12,101,715) -21.0% (10,620,471) -18.5% (1,481,244) 13.9%---------------------------------------------------------------- ----------------------------

net 45,430,142 79.0% 46,657,963 81.5% (1,227,821) -2.6%

RESPONSE TO GMCB – RATE INCREASE

• BMH will increase most hospital charges by 5% (excluding

supplies, drugs and physician charges). This results in a 3.5%

aggregate rate increase.

• Medicare, Medicaid and all physician fees are reimbursed based

on fee schedules regardless of charges.

FY2017

Budget

Budget 2017

before rate

increase

impact of rate

increaseGross patient service revenue 157,473,555 152,165,003 5,308,552 3.5%

Deductions from revenue

DSP 976,889 976,889 0 0.0%

Bad Debt & Free Care (8,000,071) (7,729,656) (270,415) 3.5%

Deductions from revenue (74,041,761) (70,304,233)(3,737,528) 5.3%------------------------------------------------------------

Net patient service revenue 76,408,612 75,108,003 1,300,609 1.7%

RESPONSE TO GMCB – 340B RETAIL

The 340B Retail Pharmacy Program differs from the hospital based 340

B program by allowing BMH buy drugs at the discounted drug prices

for prescriptions written at BMH for certain eligible patients and filled

at a contracted retail pharmacy.

Special requirements for expanding the 340 B program to encompass

retail pharmacies include:

• A written contract between BMH and any contracted retail pharmacy

including essential covered entity compliance elements.

• Separate registration of each contracted retail pharmacy location with

the Office of Pharmacy Affairs.

• Requirements that BMH ensure the compliance of any contracted

pharmacy arrangements with all 340B Program requirements to

prevent diversion and duplicate discounts.

RESPONSE TO GMCB – FY16 PROJECTION

• The projection submitted with the budget is still on track

based on July results.

• Closure effect of VY

• Prior Year Settlement

• Low Readmission Rates

• Impact of Care Coordination

RESPONSE TO GMCB-BAD DEBT&FREE CARE

• Insurance coverages with higher deductibles along with increased rate of

denials from Medicaid and commercial carriers based on tighter pre-

certification, determination of medical necessity, retrospective coverage

denials. We do have an issue in FY16 with some Medicaid denials being

mapped to free care rather than Medicaid contractual.

• Patients with coverage from New Hampshire and Massachusetts insurance

products for which we are not participating providers.

• We continue to care for Patients with no insurance.

• Our free care policy is similar to most other Vermont community hospitals

Budget 2017

% of

gross Budget 2016

% of

gross

change from Fy16

budget

Gross Patient Service Revenue 157,473,555 100.0% 154,417,865 100.0% 3,055,690 2.0% 8,564,016

Bad debt (4,842,195) -3.1% (5,026,252) -3.3% 184,057 -3.7% (222,890)

Free Care (3,157,876) -2.0% (3,113,975) -2.0% (43,901) 1.4% 2,052,349

BD & FC combined (8,000,071) -5.1% (8,140,227) -5.3% 140,156 -1.7% 1,829,460

RESPONSE TO GMCB-SALARY/FTE

• 3.1% reduction in salary and fringe benefits per FTE is to

employment growth at lower end of the pay structure.

• We anticipate a 3% increase in average annual wage in

aggregate.

• We are making more conservative assumptions in fringe

benefits, particularly on claims experience in our self insured

plan based on experience in FY2016.

RESPONSE TO GMCB-COMMUNITY HEALTH SVCS.

• In addition to developing programs focused on vulnerable

populations (eg. Homeless), BMH has provided the

following:

– Free rent to Brattleboro Pastoral Counseling Services and

Brattleboro Walk-in Center

– Collaboration with Windham-Windsor Housing Trust

– Major support for Blueprint for Health

– Provided 8 Scholarships for CCV Medical Assistant Program

• Many of these efforts require greater longitudinal study to

determine impact

QUESTIONS